The World Bank’s latest Sri Lanka Development Update projects economic growth of 4.4% in 2026, above its earlier forecast, driven by strong industrial performance and steady services growth. Although real GDP has returned to 2018 levels after 12 consecutive quarters of expansion, the recovery remains uneven as household incomes and labor market outcomes lag and poverty remains above pre-crisis levels at 16.9%. Growth is expected to slow to 4.2% in 2027 as the post-crisis rebound fades and weak productivity constrains expansion. Inflation has risen because of higher energy and food prices, while volatility in global energy markets and the potential effects of El Niño pose additional risks to productivity and food security. The World Bank said Sri Lanka must shift its growth model away from government spending toward private investment, exports and productivity gains. The report identifies agribusiness as a key source of growth, employment and poverty reduction. The wider agrifood system generates about one-sixth of GDP, more than 40% of employment and nearly 30% of goods exports. Recommended reforms include a more predictable, export-oriented trade framework, redirecting inefficient subsidies toward agricultural research and climate-smart technologies, improving quality infrastructure and cold-chain logistics, and addressing constraints involving land tenure, traceability and access to finance.
World Bank raises Sri Lanka's 2026 growth forecast to 4.4% and calls for private investment and agribusiness reforms
The World Bank raised its Sri Lanka growth forecast to 4.4% for 2026 but expects growth to ease to 4.2% in 2027 as the post-crisis rebound fades. It called for a shift toward private investment, exports and productivity, with agribusiness reforms focused on trade policy, infrastructure, public spending, land tenure and access to finance.